Tough month, tough questions

October sales disaster has industry facing the firing line

1. Why were October sales so bad? Was it payback, or is there more to it?

When sales drop 14 percent year to year, there are many reasons. Let's examine three big ones.

First of all, payback. What goes up usually comes down, and October certainly proved that. In the July-September quarter, nearly 5 million new cars and light trucks were sold in the United States. If that pace were sustained for a year it would yield 20 million deliveries -- and that's pie in the sky.

Price was a major factor in October's unpleasantness. General Motors and Ford Motor Co. reduced sticker prices on 2006 models, but those cars and trucks are thousands of dollars more than the employee-priced vehicles their dealers were selling last summer.

And don't forget high gasoline prices. Sooner or later people will get used to those prices, but right now they're turning away from big pickups and big SUVs.

The significance is that there's big trouble in the Motor City. Last month, the Big 3's North American brands had only 52.4 percent of the U.S. market. That is perilously close to a 50-50 split, and the very thought of 50-50 pumps up the sale of Maalox in Big 3 strongholds.

It's more than a blip. It's an early warning of what can happen and probably will. But 50-50 is not imminent. Big 3 market share probably will improve, maybe to as much as 57 percent.

3. In October there were no SUVs among the top 10 sellers. When was the last time that happened? What's the significance?

Let's take the easy part first. The last time there were no SUVs in the top 10 was August 1994. The Ford Explorer made the list early in 1994 but dropped out in June, July and August. It returned in September. In December 1994, the Jeep Grand Cherokee also made the top 10.

As for significance, only four of the 42 truck-based SUVs that were on the market in 2004 and 2005 showed a sales gain last month. All of the large Chevrolet, GMC and Ford carryovers dived 50 percent or more. The top-selling SUV, the Ford Explorer, crashed -- plummeting 59.4 percent. Those are crushing blows to Ford and GM profits.

4. What's behind Mitsubishi's uptick?

The redesigned Eclipse is bringing more people into showrooms. Consumers are starting to see more of the product, and they're buying. CEO Rich Gilligan says dealers are closing more than 20 percent of their serious prospects, compared with about 15 percent six months ago.

The company's Gas Comes Standard program also has helped. It provides free gasoline for a year for all 2005 models and most 2006 models, even the new Raider pickup. The Raider is all about incremental sales.

5. Why did Jaguar sales fall off a cliff?

Jaguar sales tanked mostly because the company is walking away from the X-Type, which had been its volume leader.

But even with the X-Type removed, sales still fell 36.1 percent. The XK is ancient, and everyone now has seen the new model, so those sales aren't likely to turn around. The S-Type is old but not due for a change for a couple of years, so that's bad. The XJ is still relatively new, but sales have fallen 38.3 percent for the year.

Also, Jaguar started a new brand advertising campaign last month that sucked most of the funds away from incentives and lease deals. This will be the crucial test of Jaguar's moral fiber in the next few months. Will it stick to its guns if sales don't turn around as a result of the brand campaign?